By Peter Tchir of Academy Securities
Looking Forward to Next Week
Last week may have seemed uneventful to some, with headlines about the future of the Fed, banks starting earnings season, and positive news surrounding AI/Data Centers/High-End Chips companies. The Dow and Russell 2000 saw minimal movement, the S&P edged up by 0.5%, and the Nasdaq 100 led the way with over a 1% increase.
Despite discussions regarding the FOMC, 2-year bond yields only slightly decreased by less than 2 bps, while the 10-year yields rose by less than 1 bp.
Anticipate more Fed-related news, as mentioned in our previous report, we can expect to see unconventional ideas being proposed to reshape the Fed. While it may not be the preferred path, it wouldn’t be surprising to hear suggestions like yield curve control or other “extraordinary” measures being recommended to the Fed, rather than by the Fed, which is an important distinction.
Given that the T-Report team is currently spread out across different locations, this report will be kept brief. The data flow also supports this brevity. While we may witness interesting earnings outcomes or unexpected news, the market doesn’t seem poised for significant movements next week (famous last words).
We will be closely monitoring the U.S. Treasury Deposits Customs & Certain Excise Taxes data this week. Last month, the tariff revenue reached $20 billion on the significant day. It will be intriguing to observe how high this figure will be this month, especially since there has been limited discussion about the Budget Surplus in June. The impact of tariffs on forthcoming economic data is more likely to be felt than the headline figures.
Next week’s agenda includes:
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Jobs Data. Last month’s report brought a positive surprise (largely due to government hiring seasonality). While we don’t anticipate a repeat, last month’s unexpected strength suggests otherwise.
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The Powell Press Conference (which has the potential to be quite impactful). Although the FOMC decision will be made, the press conference is where more insights can be gleaned.
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The August 1st tariff “deadline.” An impending deadline that many doubt will be adhered to, as discussed in last weekend’s Fool Me Once. The market could become more apprehensive if deals aren’t struck with significantly reduced tariffs compared to those outlined in various communications, unless clear indications of extensions are provided. This area appears to be underpriced in terms of risk by the market, despite numerous positive factors. We continue to favor companies and sectors that can benefit from deregulation and an emphasis on National Production for National Security.
The week following next seems to hold more promise for excitement compared to the upcoming week.
Disruption
One notable highlight from last week was the performance of “disruption” (using ARKK as a benchmark), which saw a 7% increase for the week! Over the span of a month, it surged by 16%, and by 72% over 3 months!
The outperformance of “disruption” aligns with crypto’s continued success last week!
The Genius Act received approval. While this would typically mark a significant milestone for many administrations regarding cryptocurrency, we anticipate this administration’s continued efforts to foster a U.S.-centric crypto landscape, with USD-based stablecoins playing a crucial role.
Most of this was already factored into Bitcoin, which concluded the week relatively unchanged (though it has risen by around 10% for the month). Altcoins outperformed Bitcoin, and we remain bullish on Ethereum. It surged by nearly 20% for the week and is poised to become an integral component of the crypto ecosystem as the industry adapts to the new legislation. The Ethereum ETF, ETHA, has witnessed a doubling in its outstanding shares since late May. Ethereum-focused ETFs appear to be less efficient, failing to pass through potential income generated from staking Ethereum. This could prompt further product innovation to provide investors with alternatives to participate in ETH’s total return, rather than just its price appreciation.
With this significant development, it paves the way for renewed discussions on the sovereign wealth fund that was initially emphasized but has since faded from the spotlight. This aligns with our National Production for National Security strategy.
Final Thoughts
As the week progresses, attention will shift towards tariffs and the August 1st “deadline.” A series of agreements could resolve this issue entirely (especially with the belief that the administration is moving away from high tariff levels and is likely to extend deadlines for key trading partners). Notably, the Liberation Day tariffs were initially implemented and then retracted retroactively, potentially resulting in a muted market response if the tariff rates outlined in communications are enforced. However, the market’s influence compelled the administration to backtrack previously, aligning with market expectations of “reciprocal” tariffs. In the absence of market pressure on the administration, why would they retract? While this scenario may seem paradoxical, our view remains unchanged that the market’s concerns about Fool Me Once (and Not Getting Fooled Again) may set the stage for just that.
Expect a tranquil, almost uneventful summer week, even amidst potential “unexpected” developments.
This could indicate the likelihood of significant, disruptive movements disrupting people’s vacations, etc., but such occurrences are more probable in the following week.
Attended my first game at Wrigley, and I must say, it was a remarkable experience!
Wishing you a fantastic (and probably uneventful) week as we prepare for potentially significant developments in the subsequent week
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